Understanding Cryptocurrency Tokens

The crypto market is getting wider and bigger and there numerous articles and discussions about the Bitcoin, Ethereum, ICOs, and Tokens. Anyone interested in the world’s financial ecosystem would like to get answers to what crypto is about – if they should be buying digital currency, for what and how. But, that isn’t all. People are interested in finding out what is driving the cryptocurrency market wild. What is the catalyst for the cryptocurrency insanity experienced?

At the moment, the catalyst for the cryptocurrency market is the Initial Coin offering, ICO or the token sales – these work, albeit differently from the store with knee scooter for sale.

Before we delve deeper into the cryptocurrency tokens, an understanding of ICO is important. ICO is almost like an IPO (Initial Public Offering) because both are used to raise capital. However, they differ in terms of the regulation. ICOs aren’t regulated.

What are tokens?

In the technical realm of cryptocurrency, tokens represent a programmable unit of currency bound to a blockchain and, it is a part of Small Contract logic, in the context of a special software application. If you understood none of that, here goes a simpler definition – a cryptocurrency token is simply a synonym for privately issued currency.

While sovereign governments issue currency under their governance, in the past, this isn’t the case with cryptocurrency. There is are groups of private organizations and individuals issuing their own currency as digital currency. These organizations and individuals the rules and the terms around the operation of the currency, creating their own semi-economies.

Tokens are built on top of blockchains, and they represent a digital asset that you can own and transfer to others.

Bitcoin tokens are built on the Bitcoinblockchain and Ethereum token built on an Ethereumblockchain.

Elements of Tokens

For usage, there are important parts that govern the usage of the cryptocurrency tokens. These include rights, toll, function, earnings, currency, and the value exchange.

The Right

When you own a token, the ownership bestows a right which guides product usage, voting, contribution, governance, action, and access to products or the market. There are cases where the tokens grant you real ownership of an organization.

Value exchange

The token is simply the atomic unit for value exchange in the crypto market or a decentralized app. The use of the token creates a transactional economy between the buyers and the sellers. In the economy, there exist features which allow a user to earn value or spend value internal to the inherent ecosystem. You earn this value by engaging in passive or active work. Therefore, the value exchange creates an internal economy.

Toll

This can be as simple as the pay per user rail necessary for access to the blockchain infrastructure or for using a product. It includes running small contracts to perform different functions or just paying your transaction fees.

Function

You can also use the token to enrich your experience through simple actions like joining a network or even connecting with users.

Currency

The token is the efficient method of transacting in the internal economy.

Earnings

These are the benefits that arise from the increase in the value of the blockchain-based models.

Note that tokens determine your ability to trade in Bitcoin or any other digital currency.